Should I hire an accountant or a bookkeeper – or do my accounting myself?
When you’re just starting out in business or preparing your first set of accounts, you’re going to wonder if it’s best to do the accounting yourself, hire a bookkeeper or maybe even get an accountant.
Well, let’s take a look at those options, their pros and cons, and then touch on what we think is the best solution of all.
The pros and cons of doing your own books
The best part of doing your own books is that it’s the cheapest method of accounting. While we’re all in favour of saving money, we’re not sure that doing your own accounts will be a net benefit to your business.
You see, unless you’re a qualified accountant or bookkeeper, there are serious drawbacks to this approach.
“Often, the best way to handle the books in a small business is to use an accounting firm that also offers bookkeeping services.”
The first is that doing the books is time-consuming. That’s time you could use to run your business, make sales, etc. And that time is a hidden cost to your business.
The second is that you’re not doing the books as efficiently as someone who has made their life’s work out of it. That means you’re at risk of making errors that could cost you a small fortune to have fixed. It is often more cost-effective to have a professional do your books right the first time, rather than doing it yourself and having to get a professional to find and fix your mistakes. That can even potentially put you out of business.
That doesn’t mean you can’t do your own books. If that’s the only option financially, it’s going to be the way you go, but it should mean there are better options out there once you can afford them.
The pros and cons of using an accountant
Obviously, we love accountants. The trouble is that bookkeeping for a small business is not, normally, why an accountant spends several years of their life obtaining their qualifications.
And because they did spend that time getting qualified, it also means that this is not going to be the most cost-effective way to keep the books, assuming you can find an accountant to take the job on in the first place.
They’re going to want to bill you for their services as an accountant, not as a bookkeeper.
This is why most businesses tend to use an accountant for more complex work, such as financial reporting, identifying tax deductions, finding financial issues (such as non-payment or lost inventory), ensuring your cashflow is adequate and identifying opportunities for growth.
Sure, there are times when having an accountant on hand can be super useful, but you really want to pay for those services at those times and let somebody else handle the day-to-day bookkeeping.
The pros and cons of using a bookkeeper
It’s in the name – they’re a professional that has qualified specifically to keep books (accounts) for businesses. Unlike accountants, who train four years or more, a bookkeeper is required to spend only about six months learning the ropes.
That means bookkeeping is their forte. If you hire a bookkeeper, they will ensure that all your legislative and regulatory burdens are met and that you’re keeping your business accounts in an orderly fashion.
That is, most bookkeepers deal with the day-to-day tasks of accounting, but most don’t take any form of strategic role inside the business, unlike accountants. This is a useful separation of duties, and it allows you to deploy the appropriate resources where you need them at the best return for your investment.
Better still, as we’ve already seen, most bookkeepers are quite a bit less expensive than an accountant’s services are, so you will get the job done well and for less money than if you hired an accountant to do it for you.
The best solution: an accounting firm with a bookkeeping service
Often, the best way to handle the books in a small business is to use an accounting firm that also offers bookkeeping services. These combination offerings ensure a better level of communication between the financial professionals that you use.
That way, you get the work done at the right price but when specialist accounting knowledge is required, it’s there on tap for the bookkeeper, that means you get the benefits of an accountant as you need them and without needing a separate conversation to explain the situation to your accountant.
This is particularly useful for people just entering the world of business, because it keeps your costs down and ensures that you still get all the financial advice that you need, as you need it. It also frees you of the headache of tracking your finances and reporting on them.
NB: this does not mean you should neglect your fiduciary duties. You should still be reviewing the accounts and financial data regularly and asking what this means for your company’s strategy).
Of course, as your business grows and becomes more complex, you might eventually want to minimise your costs by hiring a full-time bookkeeper whilst still subcontracting your accounting to an accountancy firm.
Final thoughts on managing your accounts as a small business
You can’t run a business without good accounts. The trouble is that when you run a business there are only so many hours in the day and doing the accounts yourself means wasting time and money.
Your best option, day-to-day, is to use a bookkeeper, backed with an accounting firm that can provide additional specialist knowledge when you need it. This will get you the best value for money, while removing any headaches that might have occurred if you decided to do your books yourself.
This article first appeared in issue 40 of the Inside Small Business quarterly magazine
